Kliff’s Clunker Coverage of the Cadillac Tax

There’s no doubt about it: the faux-educational website Vox had a very unfortunate week.

First, alleged wunderkind and intellectual giant Ezra Klein nixed an essay an editor commissioned because the topic might challenge its reader(s) to think different thoughts. “The concern is that people will misinterpret it as implying opposition to abortion rights and birth control.”  Can’t have free discussion of ideas, huh?

Steven Hayward eviscerated Klein, concluding that he is a “a petty and small-souled human being.” 

Ouch.

Then someone at the outlet, apparently thinking the National Rifle Association produced chocolate products, confused the organization’s image with FDR’s National Recovery Administration. Twitchy, T. Becket Adams, and The Daily Caller ridiculed the site until Vox deleted the tweet and the image

Finally, our favorite Vox writer, Sarah Kliffafter more than a month of teasing us — offered her ‘splainer of Obamacare’s Cadillac Tax, the excise tax on employer plans designed to deliver a sucker punch to workers. 

First let’s note that Kliff wrote two previous articles complaining that those nasty little business owners are offering “crummier” insurance plans.

In neither article did she mention the Cadillac Tax as the reason. And it IS the reason. 

In her piece on the excise tax, Kliff only tells part of the story. Worse yet, she implies Republicans support it (this is not true).

She first admits this:

The point of the Cadillac tax isn’t to tax health insurance. It’s to change health insurance.

Do you remember being told you could keep your health insurance? Kliff fails to mention the 2013 Lie of the Year.

And do you remember this pie chart

Oh, yes, during all the outrage over cancelled plans in late 2013, Jonathan Gruber, who helped design the Cadillac Tax, claimed that worker plans wouldn’t be touched. And then someone made a pie chart for us.

Go ahead and peek at it. That big blue area representing the “unaffected” 80 percent of Americans?

“Largely people who keep their current employer plan.” 

Kliff apparently doesn’t remember any of this when she confesses that your job-based insurance is, after all, required to change. 

She is correct when she says people of all political stripes hate what’s called “the tax exclusion” allowing workers to receive benefits tax-free. But as Duke University research scholar Chris Conover points out, there’s a BIG difference between limiting the exclusion, as various policy analysts have suggested, and wiping it out through the highly regressive Cadillac Tax:

In short, whereas capping the tax exclusion even-handedly eliminates the tax subsidy for all workers above a certain premium dollar threshold, the Cadillac tax is far more pernicious–imposing a far heavier burden on low-wage workers than high-wage workers. That is, instead of merely reducing the low-wage worker’s tax subsidy to zero, the Cadillac tax goes overboard by using the tax code to actually penalize the provision of employer-provided health benefits to low wage workers. In contrast, while it obviously reduces the magnitude of the subsidy for high wage workers, it nevertheless leaves in place a net taxpayer subsidy for the identical health coverage for which a low-wage worker would face a tax penalty! Leave aside fairness: does that make any policy sense to you?

So when Jon McDonough told her the Cadillac Tax is “working just as Republicans wanted,” he either lied or is wildly uninformed about the law he helped write. 

And Kliff swallowed it whole.

Furthermore, Kliff writes that Economists think the Cadillac tax will give Americans a raise. Let’s put aside the proposition that A TAX can increase your take-home pay and proclaim that this is almost true. 

Some economists — like Gruber — have maintained for years that Americans are going to see pay raises as the tax forces companies to dilute the value of health plans they offer. (See Obamacare’s Wage Growth Hoax for more detail.) But other economists, health policy experts and even some Congress members find this doubtful. 

Linking to only one study, Kliff writes, “There’s a vast body of economics research that shows workers bear the cost of more expensive health plans with lower wages. These papers suggest there’s a lump sum amount that companies spend compensating workers. It goes into either wages or benefits.”

A lump sum, huh? Employers have no other options for savings they reap? What about distributing dividends or cutting the price of products they market? What about hiring more workers, say in Human Relations, to comply with Obamacare reporting requirements?

Have Gruber or Kliff ever run a business?

Keep in mind that at the time the tax was being debated, Megan McArdle demonstrated that she’d actually put some thought into the proposition:

What if employers just cut their costs and don’t raise their employees wages? What if employers just cut their costs and don’t raise their employees wages, because they’re in a dying unionized industry? What if they shift workers to other forms of tax-deferred compensation, like 401(k) matching or HSAs?

Indeed. What if this doesn’t work? What if employees suffer both higher health care costs and no pay raises?

After reading Kliff’s article, Gruber researcher Rich Weinstein tweeted:

And he’s right. Here’s what she omitted:

  • In his ’08 campaign the President swore his health reform plan wouldn’t tax worker benefits. He spent $100 million hammering John McCain for proposing a cap on the employer exclusion. 
  • And because they all understood the tax would be a political nightmare, John Kerry, to quote Gruber, “had a very clever idea. He said, ‘Let’s call it instead a tax on insurance companies and not a tax on insurance plans.’…Now, you and I know, economists know, that that will just get passed on in the price of insurance.”
  • Three days later, Obama said this to his Shaker Heights, Ohio, audience:

First of all, in terms of taxing benefits, I said I oppose the taxing of health care benefits that people are already receiving, so that’s not a proposal that I’m supportive of…But what I said and I’ve taken off the table would be the idea that you just described, which would be that you would actually provide — you would eliminate the tax deduction that employers get for providing you with health insurance, because, frankly, a lot of employers then would stop providing health care, and we’d probably see more people lose their health insurance than currently have it. And that’s not, obviously, our objective in reform. OK?

But that was the objective. Bye-bye, employer-sponsored coverage. “Everybody, into the exchanges!” As analyst Patrick Garry writes:

Obamacare was sold as supporting the employer-based system, not eroding it. But at its core, Obamacare is designed to do precisely that: to eventually force every American with employer-based coverage onto the Obamacare exchanges, whether they like it or not.

So there’s your ‘splainer, Vox. You’re welcome. Feel free to update your article with this material. 

We would have made corrections in your comments section instead of writing a long and embarrassing blog post, but you don’t allow comments on your articles.

And it’s pretty clear why.

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2 thoughts on “Kliff’s Clunker Coverage of the Cadillac Tax

  1. Pingback: Sarah Kliff Unloads Yet Another Awful Voxplanation | Exposing Obamacare

  2. Pingback: Ezra Klein, Please Don’t Fire Sarah Kliff | Exposing Obamacare

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